Russia may face the risk of ‘default’ after the US Treasury Department announced that it would block the country’s final ability to repay its debt to international investors.
Default is the failure to make the required interest repayment on a debt at the agreed time, whether the debt is a loan or a security.
In an unplanned notification Tuesday, the U.S. Treasury Department said it had no plans to renew a license that would allow Russia to continue paying off its debts through American banks.
Since the first sanctions were implemented, it has licensed banks to process any U.S. dollar -denominated bond payments from Russia. However, the capability will expire at midnight on May 25th.
Even so, there is nothing surprising from this announcement given that Treasury Secretary Janet Yellen had hinted about it at a press conference ahead of the G7 finance ministers meeting in Germany last week.
Unfortunately for Russia, without a license to use U.S. banks to pay off its debts, the country will have no other way to repay the bonds of its international investors.
Previously, the country had used JPMorgan Chase and Citigroup as channels to pay its obligations.
